How we handle Fluctuating Income
Many folks who are self-employed, own their own businesses, or have unpredictable income are heavily challenged with making ends meet. Expenses, often, do not fluctuate. The unfortunate result is the unending falling behind/catching up nightmare...that never ends. Turning Point Stewardship has a solution for this...and it may be a little challenging...at first. but a huge relief at the end.
The Turning Point Solution
The first thing we do with our members to do is to look back at 12-24 months worth of income history. Then we'll ask, 'Do you anticipate the coming year to be less than, more than, or about the same amount of income?" Based on this answer we'll establish a conservative estimate of income for the Cash Management Plan. We'll then create a expense plan that falls just below the anticipated monthly income and thus providing a bit of margin.
Current Expense Rate: For most folks, their expenses are too high to be sustained by fluctuating income (see Current Expense Rate). There are more months with deeper deficiencies (valleys) then there are months with surplus (Peaks). With this pattern, there is a slow decent into debt or at best, constantly treading water and going no where.
Proposed Expense Rate:This is where we look closely at your expenses and adjust them to be based on a conservative estimate average income of the past 12-24 months. This is the "belt tightening" that everyone talks about. This rate will, over time, begin to create margin in your finances and allow for the achievement of other financial goals and/or handle unexpected emergencies.
Ideal Expense Rate: This is a more radical and aggressive approach to managing your finances and ensuring a very positive outcome both now and for your future. Rather than taking an average of the past 12-24 months of income, we look for the lowest month of income and set this at the budgeted income level and structure the expenses to fall within this limit. This approach is not for everyone, but for those who can handle the "pain" of serious belt tightening, can really flourish financially.
We'll talk with you about this if this is your situation and come up with an acceptable plan for you.